Hills "on track" to hit profit despite revenue drop

Hills says its plan to return to profit in 2018 is on track, despite taking a hit in the first half of 2018 from shedding its NBN satellite installation business.

The company saw revenue decline by $21 million in the six months leading up to 31 December 2017, posting $136 million compared to $157.3 million in the previous corresponding period.

“I am pleased with the overall first-half performance of the company and look forward to achieving continued improvement in the second half,” Hills chief executive David Lenz said.

“Based on the first half results and Hills’ current strategic initiatives, the company continues to anticipate delivering a trading profit in the second half of [the 2018 financial year].”

According to Hills, it took a $13 million hit for exiting its “unprofitable” NBN satellite installation business. The company reported that revenue was also affected by a $5 million shortfall in TV antenna sales.

Hills' EBITDA was also down to $3.6 million for the period, but is up from a $2.1 million loss in the second half of the 2017 financial year.

The company said it was a "solid turnaround" after into accounting for the transition of Hills Home Living to garden and hardware retailer Ames Australasia and an inventory impairment in the previous reporting period.  

Net profit after tax is also down with a $700,000 loss for the period, despite having operating expenses down 18 percent for the period at $40.4 million. Comparatively, net profit in the same period last year was $200,000 and operating expenses were at $49.3 million.

Hills’ security, surveillance and IT business, its largest division, remains steady with 4 percent growth, landing IP camera contracts with Sydney Trains, Woodside Petroleum and Queensland Corrections.

The IT business specifically saw growth through its networking vendors Ruckus, Brocade and Extreme Networks.

“It was encouraging to see the growth in the largest part of Hills business in the first half,” Lenz said.

“With the successful launch of our new distribution centre and e-commerce platform, we expect to see continued growth in the current half.”

Hills appointed Lenz managing director earlier this week, 18 months after he took on the chief executive role in September 2016 and three years after he joined the company from Ingram Micro.

Also earlier this month the distributor hit back at former vendor Milestone Systems for its attempts to wind the company up over a $56,000 bill, contending that the proceeds are an abuse of process by Milestone.

Hills shares were trading at 24 cents per share at the time of writing, down 2 cents from its previous close.